Office of the Commissioner of Financial Regulation

When performed in accordance with applicable local, state, and federal laws, property preservation helps to ensure
that lenders and mortgage holders are protected from further damages or costs associated with the property, and helps
to keep neighborhoods free from blight. However, the Office of the Commissioner of Financial Regulation ("Office") has
recently received complaints pertaining to acts taken on behalf of servicers for the stated purpose of property preservation.
The Office is committed to ensuring that state-licensed servicers and their agents comply with laws governing property preservation.
Property preservation complaints are subject to the Commissioner's investigatory and enforcement powers as outlined in the Maryland
Mortgage Lender Law and accompanying regulations, as well as other Maryland laws, including, but not limited to, the Maryland
Mortgage Fraud Protection Act and the Maryland Consumer Protection Act.

I. Property preservation background

Property preservation, defined broadly, is the process of maintaining the interior and exterior of a building to prevent it from
falling into disrepair. Throughout the default process the servicer is responsible for performing all property maintenance functions
to ensure that the condition and appearance of the property are maintained satisfactorily. This responsibility includes:

Vacancy determinations

Securing

Lawn maintenance

Winterization

Trash removal

II. Nonjudicial evictions

While the mortgagee's authority to engage in property preservation usually stems from a breach in its contractual relationship
with the mortgagor, this contractual right is conditioned by local, state and federal laws which delineate certain rights for
mortgagors and tenants in actual possession of the property.

A protected resident includes a grantee, tenant, subtenant, or other person in actual possession by, through, or under an owner
or former owner of residential property. It does not include a trespasser or squatter.

Prohibitions: A party claiming the right to possession
may not (i) lock the protected resident out of the residential property; (ii) engage in willful diminution of services
(i.e. intentional interruption of heat, gas, electric, water etc.) to the protected resident; (iii) take any other action that deprives the
protected resident of actual possession. Possession may only be taken from a protected resident in
accordance with a writ of possession issued by a court and executed by a sheriff or constable.

Notice Requirements: The Act authorizes a party claiming the right of possession to use
nonjudicial self-help to take possession of the property if:

(i) the party reasonably believes the protected resident has
abandoned or surrendered possession of the property based on a reasonable
inquiry into the occupancy status of the property;

(ii) provides notice as required by the Act; and

(iii) receives no responsive communication to that notice within 15 days after the later of posting or
mailing the notice as required by the Act.

Remedies for Violation: In addition to those enforcement measures available to the Commissioner
of Financial Regulation, the Act specifically provides for private rights of action which may include
possession of the property, actual damages, reasonable attorney's fees and costs.

Slightly different provisions apply to tenants under residential leases and tenants in a mobile home
park (see RP §§8-216 and 8A-1102.)

III. Abandonment Determinations and Lock Outs

Per the FNMA guidelines
(PDF document, download
Adobe Acrobat for free) for property preservation, determinations as to abandonment require
specific documentation, even where there has been notification from a borrower or other verifiable
source that the property has been abandoned. Additionally, RP § 7-113(c)(1) requires that a
servicer make a reasonable inquiry into the occupancy status of the property before posting notice to
an abandoned property. FNMA guidelines require servicers to secure an exterior door or a
secondary door for access to the main dwelling of an abandoned property. The guidelines
specifically state, however, that only one lock is allowed to be changed for a main dwelling. In the
event that the main entrance is the only option for gaining access to the abandoned property, that
entrance may be rekeyed per the guidelines.

IV. Tenants' Rights

The Office has received consumer complaints alleging that some tenants have been unable to
contact their servicer by calling the telephone number included on a notice of abandonment posted
pursuant to RP § 7-113(b)(2)(ii). RP § 7-113's prohibition on nonjudicial evictions applies to
tenants as well as homeowners. Thus, a party claiming the right to possession must follow the
process outlined in RP § 7-113(b)(2)(ii), including: conducting a reasonable inquiry into the
occupancy status of the property, posting notice, and waiting 15 days for a response by a tenant
before using self-help to take possession of the property. In order to comply with RP § 7-113,
servicers must have procedures in place to allow tenants to contest an abandonment determination
during the pre and post-foreclosure period.

V. Legality of Inspection fees

Maryland Code, Commercial Law (CL) § 12-121 governs the legality of lenders' inspection fees in
Maryland. Lender's inspection fee is defined in the statute as a fee imposed by a lender to pay for a
visual inspection of real property. CL § 12-121 prevents a lender from imposing an inspection fee
in connection with a loan secured by residential real property. Under CL § 12-122, a willful
violation of § 12-121 carries a fine not exceeding $500 or imprisonment not exceeding six months,
or both.

In Taylor vs.
Friedman (PDF document, download
Adobe Acrobat for free), 344 Md. 572 (1997), the Maryland Court of Appeals held that CL § 12-121's prohibition against
imposing a lender's inspection fee in connection with a loan is not limited to fees charged in connection
with a settlement. In Taylor, when a delinquency continued for more than 45 days from the due date, the
lender caused the property to be inspected by an independent entity and charged the mortgagor's account
an inspection fee on each such occasion. The Court ruled that CL § 12-121 prevented those charges from
being passed on to the mortgagor. Taylor remains good law in Maryland and applies to circumstances where
a servicer orders a visual inspection of property following default on the terms of a mortgage.

For More Information

For any questions or more information, please contact Brian Patrick Weeks, Assistant Attorney General,
at 410-230-6359, or via email at
bweeks@dllr.state.md.us.